WASHINGTON—The Federal Reserve Bank of Chicago is being asked by NAFCU to develop and adopt guidelines related to its Borrower-in-Custody (BIC) program in order to allow electronic signatures on loans as pledged collateral.
The BIC program allows institutions to pledge a portfolio of its loans while maintaining physical control of the loans on its own premises.
In a letter to the Chicago Fed, NAFCU Regulatory Affairs Counsel Andrew Morris wrote that the association is not aware of any "systemic or insurmountable barriers currently impacting the marketability of electronically signed loans in the area served by the Chicago Federal Reserve."
"Credit unions are experienced lenders that know how to create legally binding and enforceable agreements utilizing electronic records and signatures," Morris added. "The Federal Reserve Bank of Chicago should permit acceptance of e-signed loans as pledged collateral under BIC program guidelines, provided that credit unions can demonstrate that their electronic lending platform produces adequate records."
He further explained that guidance in this area would resolve any lingering uncertainty regarding eligibility determinations and would improve credit unions' access to liquidity.
Morris argued that the lack of clear guidance on the issue "directly impacts credit unions' access to liquidity."